LA JOLLA
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At least 13 percent of emergency loans granted through a special program for UC San Diego employees were based in part on fraudulent documents, according to a campus audit that looked at lending over a one-year period.
Employees with unanticipated expenses or emergencies who were turned down for a loan elsewhere can apply to borrow up to $1,000 through the UCSD Employee Emergency Loan Fund and may receive better-than-market rates. At least 17 of 131 loans approved between Oct. 1, 2006, and Sept. 30, 2007, were granted based on fraudulent documents prepared by a UCSD supervisor, the audit found.
Two of the 17 applications were withdrawn during or after the audit.
In all, $15,000 in questionable loans were made to university employees who may not have been qualified to receive them.
The applicants were unaware of any subterfuge, according to the audit obtained in a public records request by The San Diego Union-Tribune, and some may have been victims. There is no application fee, but one UCSD employee appears to have solicited $45 to $50 in unauthorized processing fees from applicants. Only one person admitted to paying a fee.
Loan applicants say they knew and trusted her because of her longtime employment and position as a representative with the American Federation of State, County and Municipal Employees union, the audit found. A union spokesman declined to comment.
As a result of the audit, the union representative was referred for “corrective action,” though university officials declined to specify the discipline because it is a personnel matter. The other employee involved, a registration supervisor who prepared and submitted fraudulent supporting documents, was placed on investigatory leave on Oct. 15, 2007, and decided to retire in January.
No criminal charges were filed against either employee.
The employees handling the loans were not named. Both the employees and the applicants involved worked for UCSD Medical Center.
“It's important to note that we caught this problem ourselves and took immediate and appropriate actions to investigate and conduct an audit,” said Sally Brainerd, associate controller for UCSD.
“Because the loans reviewed were either in repayment via payroll deduction or repaid, the financial risk to the university is minimal,” according to the audit.
However, the result of the fraud was that loans that may not otherwise have been granted were given to employees from a university fund, according to the audit.
And one loan recipient who left the university with an unpaid balance of $300 was referred to a collection agency.
The short-term loan program has existed since 1970 throughout the University of California system as a benefit for those with emergencies or financial hardship who were turned down for at least one loan from a bank or credit union. The loans are issued from a UC fund, and the interest rates – which change quarterly – are equivalent to the rate of return the UC earns on its short-term investments, Brainerd said. Staff and faculty who have completed their probationary period and have an overall performance rating of solid or better are eligible to apply. UCSD receives roughly 160 applications a year.
The investigation began after a manager spotted two suspect loan applications in the registration supervisor's office, and related documents that appeared to be forgeries or templates used to create forgeries.
Fraudulent documents involved loan denial letters and car repair estimates.
The registration supervisor admitted only to completing one fraudulent estimate to “help someone who was in need of a loan.” But the audit determined she had been involved with many more, after they were delivered to her by the union representative. Two applications were never submitted.
As a result of the fraud, UCSD has put safeguards in place. Applicants are required to provide original documents supporting their loan request at the time that they sign the promissory note. A designated official in each applicant's department is now required to approve all emergency loans, in addition to the assistant director of Student Business Services. And if any loan is given under false pretenses, a clause now gives UCSD the right to assess penalties of up to 20 percent of the loan amount or 1.5 times the original loan rate.
Sherry Saavedra: (619) 542-4598; sherry.saavedra@uniontrib.com
